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Re: Reid rejects Boehner proposal for $2 trillion in spending cuts

Originally Posted by donsutherland1

IMO, credible fiscal consolidation will require some tax hikes. First, revenue changes will be necessary to develop a sufficiently broad base of political support to enact, implement, and sustain such a program. Second, real problems exist in the Tax Code that should be addressed. One such problem is the high percentage of Americans who pay no income taxes, as cited by former Comptroller General David Walker. Third, efficiency gains could be achieved by broadening the tax base and simplifying the Tax Code (eliminating deductions/closing loopholes in exchange for somewhat lower rates).

IMO, the widely-popular home mortgage deduction should be examined, as part of a larger review, especially as such a deduction likely contributed (in part) to the run-up of the housing bubble, as taxpayers subsidized additional leverage. Whether the deduction would be eliminated, reduced in size/capped and tied to nominal GDP (not housing prices, as a cap tied to housing prices would be procyclical and enhance the risks were a new bubble to develop well down the road), etc., would depend on the examination. Moreover, a transition whereby existing homeowners are held harmless could be politically necessary. Another deduction that should be reviewed relates to the deductibility of interest on state and local government bonds. States/localities would object to a loss of that deduction. However, the reality is that this program also creates incentives for states/localities to increase their debt. Balanced budget requirements aside, state and local government debt has steadily increased. Of course, such a move might need to be tied to a more transparent program of transfers to state/local governments. Fourth, changes related to the 2001 and 2003 tax relief programs will very likely have to be considered in the larger context of overall tax reform given the amount of revenue involved.

Having said all that, while I believe some revenue increases will be needed to contribute to fiscal consolidation, those increases cannot account for a majority of the fiscal consolidation effort. Spending reductions/mandatory spending reforms should account for 2/3 or more of the fiscal consolidation (note: interest savings from debt reduction are not a spending cut, but are attributable to the overall balance of spending reductions/tax hikes involved in fiscal consolidation). Any greater involvement of tax hikes would likely create a growing risk of increasingly sluggish economic growth. Reduced economic growth could exacerbate the nation's long-term fiscal picture, leading to a more negative outlook, increased risk premia that raise the cost of servicing the nation's debt, etc. If nominal GDP growth were to fall toward and then below the nation's cost of financing its debt, that would present an especially perilous situation.

A similar situation prevails with respect to public investments (expenditures that yield long-term benefits). If investments are treated as little different from other discretionary spending, the country could also risk putting itself on a slower economic growth trajectory.

Finally, revenue increases cannot become an excuse for policy makers to try to avoid restructuring of the nation's mandatory spending programs. Already, problems inherent in those programs are becoming more urgent as the enormous Baby Boom cohort continues to retire. Social Security can readily be fixed with benefit changes, increased age of eligibility (pegged to life expectancy changes), and some payroll tax hike (rate and/or ceiling increase). Medicare and Medicaid present a much more complex problem. IMO, addressing those two programs will require the kind of reform that dramatically reshapes U.S. health care, namely addresses the industry's excessive cost growth problem. Such a solution almost certainly will require major changes with respect to technology procurement/deployment and supply side remedies that significantly increase the supply of medical practioners in the U.S. Premiums and benefit formulas for Medicare and Medicaid will need to be adjusted. The latter approach, absent a remedy for the excessive cost growth problem, would lead only to increased rationing, whether it is through reduced purchasing power of vouchers vis-a-vis the price of medical services or budget-driven mechanisms.

Unfortunately, at present, the American public appears ill-informed about the main drivers of the imbalances and [url=http://www.washingtonpost.com/politics/poll-shows-americans-oppose-entitlement-cuts-to-deal-with-debt-problem/2011/04/19/AFoiAH9D_story.html]unprepared to support the required changes. That will make it difficult for the nation's policy makers to enact robust reforms, as well as to sustain the effort, absent the emergence of a transformational political leader of an FDR, JFK, or Reagan stature who can lead big change.

My sense is that the public is being misinformed by congress, which states the problem is medium to long-term, whatever that means.

As a lifelong registered democrat, I am disappointed that congressional leaders and the president are willing to cede this issue to the other side. There can/should be a democratic response to the runaway deficit which does more than raise about $50 billion a year by "taxing the rich". Let them lay out their thoughts on tax increases and spending cuts and the republicans can do the same. Thus we could have a real referendum on the path Americans want to go down.

Re: Reid rejects Boehner proposal for $2 trillion in spending cuts

Originally Posted by washunut

My sense is that the public is being misinformed by congress, which states the problem is medium to long-term, whatever that means.

As a lifelong registered democrat, I am disappointed that congressional leaders and the president are willing to cede this issue to the other side. There can/should be a democratic response to the runaway deficit which does more than raise about $50 billion a year by "taxing the rich". Let them lay out their thoughts on tax increases and spending cuts and the republicans can do the same. Thus we could have a real referendum on the path Americans want to go down.

Like you, I would very much like to see additional alternatives. Once substantive alternatives are available, a genuine policy debate can commence. Then, there would be a higher prospect of the necessary trade-offs being made so as to pursue the overall goal of fiscal consolidation. Each side will need to gain something in order to take the risk of pursuing fiscal consolidation.

The current situation, largely between the Ryan plan and the status quo (the President's recent speech articulated principles but there is no concrete policy document at present that could be used to help guide negotiations) is one that is not favorable for implementing and sustaining meaningful fiscal consolidation. Indeed, in such a confrontation, something closer to the status quo is probably favored. The race in New York's 26th congressional district might offer a quick snapshot of current political sentiment which could favor the status quo and lend further credibility to the recent Washington Post poll.

Finally, the "Gang of Six" (now Five), missed a huge opportunity that was available to provide a credible alternative. The opportunity is still there, but the first chance for a meaningful contribution could disappear as the nation's political leaders negotiate the terms of a debt ceiling increase. The next big opportunity for fiscal consolidation might not be present until after the 2012 elections.

Re: Reid rejects Boehner proposal for $2 trillion in spending cuts

Originally Posted by washunut

My sense is that the public is being misinformed by congress, which states the problem is medium to long-term, whatever that means.

As a lifelong registered democrat, I am disappointed that congressional leaders and the president are willing to cede this issue to the other side. There can/should be a democratic response to the runaway deficit which does more than raise about $50 billion a year by "taxing the rich". Let them lay out their thoughts on tax increases and spending cuts and the republicans can do the same. Thus we could have a real referendum on the path Americans want to go down.

Problem is that demo's have nothing like that to put forward in the first place. It has been over 700 days of demo control, and no budget. Americans don't live like that, at least not responsible ones. In fact the only thing demos seem to be able to do these days is talk down to people, push for higher priced every thing including taxes, and demonize the successful. Pathetic.

j-mac

Americans are so enamored of equality that they would rather be equal in slavery than unequal in freedom.
Alexis de Tocqueville

Re: Reid rejects Boehner proposal for $2 trillion in spending cuts

Originally Posted by donsutherland1

Like you, I would very much like to see additional alternatives. Once substantive alternatives are available, a genuine policy debate can commence. Then, there would be a higher prospect of the necessary trade-offs being made so as to pursue the overall goal of fiscal consolidation. Each side will need to gain something in order to take the risk of pursuing fiscal consolidation.

The current situation, largely between the Ryan plan and the status quo (the President's recent speech articulated principles but there is no concrete policy document at present that could be used to help guide negotiations) is one that is not favorable for implementing and sustaining meaningful fiscal consolidation. Indeed, in such a confrontation, something closer to the status quo is probably favored. The race in New York's 26th congressional district might offer a quick snapshot of current political sentiment which could favor the status quo and lend further credibility to the recent Washington Post poll.

Finally, the "Gang of Six" (now Five), missed a huge opportunity that was available to provide a credible alternative. The opportunity is still there, but the first chance for a meaningful contribution could disappear as the nation's political leaders negotiate the terms of a debt ceiling increase. The next big opportunity for fiscal consolidation might not be present until after the 2012 elections.

I find these one time run offs to often be less of a watershed. I do not know the candidates, but often one can simply be a better campaigner than the other. Also outside money can make a big difference if one side is mobilized.

It seems like the gang of six has fallen apart and I think that is a good thing. I say that because that would be a mishmash of dem and rep ideas. That would only cloud the waters for 2012.

I would love to see a series of Lincoln/ Douglas type of debates between Obama and whomever the republican nominee is on this topic. Not a series of questions with 30 second responses, but a real debate on our economy, an energy plan, the deficit etc.

Re: Reid rejects Boehner proposal for $2 trillion in spending cuts

Originally Posted by washunut

I find these one time run offs to often be less of a watershed. I do not know the candidates, but often one can simply be a better campaigner than the other. Also outside money can make a big difference if one side is mobilized.

It seems like the gang of six has fallen apart and I think that is a good thing. I say that because that would be a mishmash of dem and rep ideas. That would only cloud the waters for 2012.

I would love to see a series of Lincoln/ Douglas type of debates between Obama and whomever the republican nominee is on this topic. Not a series of questions with 30 second responses, but a real debate on our economy, an energy plan, the deficit etc.

Re: Reid rejects Boehner proposal for $2 trillion in spending cuts

Originally Posted by washunut

I find these one time run offs to often be less of a watershed. I do not know the candidates, but often one can simply be a better campaigner than the other. Also outside money can make a big difference if one side is mobilized.

I don't disagree. That's why I noted that it would be a quick snapshot of the current political sentiment rather than a barometer of the future. A lot can and will change between now and the 2012 elections.

I would love to see a series of Lincoln/ Douglas type of debates between Obama and whomever the republican nominee is on this topic. Not a series of questions with 30 second responses, but a real debate on our economy, an energy plan, the deficit etc.

I share those sentiments. Unfortunately, in today's soundbite-driven era, I suspect that if something cannot be Tweeted, the "debate" ground rules won't be too favorable for such a response. Moreover, debate rules that make it necessary for candidates to have substantive knowledge of key issue areas probably would not be favored by the campaigns either. It is s shame, because there is a real need to inform the public and for the candidates to offer concrete ideas/a compelling vision for a better fiscal path.

That would be helpful. Unfortunately, as such phrases/terms are used to avoid debate by delegitimizing the opposing viewpoint by means other than the use of concrete evidence, no campaign would accept such a limitation.

Battle lines in federal debt talks sharpened markedly Thursday when the Senate's top Democrat rejected a proposal for $2 trillion in budget cuts as demanded by House Speaker John A. Boehner, saying any cuts must be accompanied by action on closing tax loopholes.

"You can't do $2 trillion just in cuts," Senate Majority Leader Harry Reid (D-Nev.) said in an interview in his Capitol office. "There has to be a mix of spending cuts, including defense. There has to be a more fair apportionment of tax policy in this country."

Republicans have resisted using tax reform to rein in deficits as Congress and the White House try to break a stalemate over raising the nation's debt limit by Aug. 2 to avoid a first-ever federal default. Boehner's office reiterated Thursday that tax hikes would not be "on the table" in talks.

The unmitigated nerve of anyone on the Democratic side to actually float the ridiculous idea that a budget has two sides!!!!!!!!!!!

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There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.... John Rogers